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Spillover from the Haven: Cross-border Externalities of Patent Box Regimes within Multinational Firms

Schwab, Thomas and Todtenhaupt, Maximilian (2016) Spillover from the Haven: Cross-border Externalities of Patent Box Regimes within Multinational Firms. WU International Taxation Research Paper Series, 2016-07. WU Vienna University of Economics and Business, Universität Wien, Vienna.

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Abstract

This paper analyzes externalities of patent box regimes in Europe. Tax reductions inforeign affliates of a firm that also provide a protit shifting opportunity reduce the user cost of capital and thereby increase domestic investment. We test this mechanism for the case of research activity. By combining in formation on patents, firm ownership data and specific characteristics of patent box regimes, we show that patent box regimes without nexus requirements for tax-efficient reallocation of patent profits induce positive spillovers within multinational groups. The implementation of a patent box in a country one of the foreign affiliates of a firm resides, increases domestic research activity by about 74 percent or 2 percent per implied taxrate differential. Furthermore,our findings suggest that patent boxes generate negative spillovers on average patent quality. This has important implications for international tax policy and the evaluation of patent box regimes. (authors' abstract)

Item Type: Paper
Additional Information: Editors: Eva Eberhartinger, Michael Lang, Rupert Sausgruber and Martin Zagler (Vienna University of Economics and Business), and Erich Kirchler (University of Vienna)
Keywords: patentbox / spillover / corporatetaxation / innovation
Classification Codes: JEL F23, H25,O31
Depositing User: ePub Administrator
Date Deposited: 07 Nov 2016 13:53
Last Modified: 07 Nov 2016 14:01
URI: http://epub.wu.ac.at/id/eprint/5230

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